The Cryptocurrency Trading Journal

[Daal]

What Willy predicts is that we're in a bull market. What his service provides is to give us confirmation that the bear market is here after it's here. In a bitcoin bull market, these mini-corrections are normal

10-30% is actually predicted by his models. The reason for this is that his proprietary on-chain analytics show the price you see on the exchanges, ~$55K fluctuates higher than the price support of where the Institutions have strong buy support, what we refer to as Rick Astley buyers

Willy has a friendly bet with someone on Twitter, and the bitcoin has already been sent to an escrow, Fluffypony, who used to be the lead developer and maintainer of Monero

Willy is betting that bitcoin does not go below $46,400 or somewhere in that number, you can check his twitter history, it was made on 4/13 when the price was closer for Willy to lose the bet

You're worried about a 50% crash, don't be. On one of the videos, Willy discusses that his model predicts there is strong support at $53K and obviously, he buys when it fluctuates on low end of the plus 10-30% of the Rick Astley buyers and sells when it's closer to the high end using his trading capital

Microstrategy and Tesla have billions on the line, and other institutions have hundreds of millions of $ on the line, we are not in a bear market

The difference in my investing to yours is that you optimize your strategy to the base case scenario. I try to maximize to the base case while still making it robust to non-base case scenarios. That means I sacrifice profits in the base case to insure against less likely scenarios, while you just dismiss them. If you are happy with that then great

But I wanted to ask you something different, how do you handle crypto custody? Do you use custodians? Self-custody? What is your security strategy for making sure you dont lose your crypto? I think this journal needs more of that. There are lots of ways to lose all coins in this space, I dont want people to go through that (or for myself to go through that). If that happens all of these profits evaporate

 

[johnarb]

The difference in my investing to yours is that you optimize your strategy to the base case scenario. I try to maximize to the base case while still making it robust to non-base case scenarios. That means I sacrifice profits in the base case to insure against less likely scenarios, while you just dismiss them. If you are happy with that then great

But I wanted to ask you something different, how do you handle crypto custody? Do you use custodians? Self-custody? What is your security strategy for making sure you dont lose your crypto? I think this journal needs more of that. There are lots of ways to lose all coins in this space, I dont want people to go through that (or for myself to go through that). If that happens all of these profits evaporate

I'm not happy with a decline of 30% in the portfolio, but how else can I hodl through the bull market? This is where the altcoins help in smoothing out the bitcoin volatility, BNB and CAKE actually were pumping last night and almost erased all the losses from the btc downmove, but both have gone down since and still offsetting the losses from btc, but not as much anymore

Anyway....

Self-custody for me always. I don't use Windows, ever, with crypto. Only Linux

redacted.... opesec. if you caught it, you got it

 

[johnarb]

Genuine question, how do you handle a pullback such as now using your traditional investing methodology and risk management?

It seems to me that now is a good time to get out of bitcoin and cryptos or decrease positions before the losses continue to increase to -30%, -40%, -50%, -80%

This has happened in the past, as well from $42K to $28K and $52K to $43K

 

[NoahA]

we are not in a bear market

I do love your posts John. No matter how much people disagree with you, you always come back with facts and references. You're a wonderful ET poster to converse with.

I agree with you that we aren't in a bear market. Its super easy to look at the chart and see this. As you say, there are regular 20-30% pullbacks, as outlined on my chart.

I also love that you are watching the flows. It seems to be a huge edge over trading things like stocks or futures where its difficult to know who is doing the buying.

But I think that because of the volatility of crypto, knowing you're in a bear market will only happen once we go down 50% from the high and stay there for a while. It might not matter to those that got in at 5k, 10k or even 20k, but with TSLA getting in around 35-40k from what I recall, a 50% drop from the highs will mean their investment might turn negative. Of course if they are long term holders then it doesn't matter much, but I believe most in the crypto space are only in it for the gains. When it stops going up, they get out, and I don' think there are enough long term hodlers to support these prices.

 

[johnarb]

I also love that you are watching the flows. It seems to be a huge edge over trading things like stocks or futures where its difficult to know who is doing the buying.

But I think that because of the volatility of crypto, knowing you're in a bear market will only happen once we go down 50% from the high

I subscribed to Willy Woo's subscription. There's a couple of things that he said on his last report (or may have been on a YouTube Video with Peter a few days ago)

1. The bull market indicators based on his on-chain analytics is very strong. Outflows of bitcoins from exchange wallets to private wallets are ongoing

2. There is a strong support around $53K. That's a key level as it's a $1T market cap for bitcoin validating it as a true investment asset

However, even if bitcoin goes down below $53K, the Rick Astley buyers (the price support provided by institutions accumulating) are in the area of $48K to $51K

As I mentioned to you before, 50% downturn in this bitcoin bull market and stay there (not flash crash) is not possible if Willy's models are correct. If Willy is wrong, then it's time to throwaway his on-chain analytics in the garbage

 

[Daal]

Genuine question, how do you handle a pullback such as now using your traditional investing methodology and risk management?

It seems to me that now is a good time to get out of bitcoin and cryptos or decrease positions before the losses continue to increase to -30%, -40%, -50%, -80%

This has happened in the past, as well from $42K to $28K and $52K to $43K

I manage by having the % in my portfolio in this sector that I deem appropriate given the risk-reward of the current situation. For me, personally, that %, isn't and will never be 100%. Even 50% seems a little much to me but it could make sense at the depths of a bear market and if the person has sufficient other assets/income. I started the year at 20%, I dont know where it is now because I dont want to be affected too much by it by counting my chips every week. The way I see it, if BTC gets crushed by 50%, its likely to draw all the institutions that are late, that missed the rally but like BTC (the Dalios of the world) and they will pop the price back up. But if I'm wrong and BTC gets creamed by 80% and alts by 95%, well, I still own plenty of old finance assets in old finance institutions. My life won't change much. I'm just going to be a little pissed that I didnt rebalance earlier

 

[johnarb]

I manage by having the % in my portfolio in this sector that I deem appropriate given the risk-reward of the current situation. For me, personally, that %, isn't and will never be 100%. Even 50% seems a little much to me but it could make sense at the depths of a bear market and if the person has sufficient other assets/income. I started the year at 20%, I dont know where it is now because I dont want to be affected too much by it by counting my chips every week. The way I see it, if BTC gets crushed by 50%, its likely to draw all the institutions that are late, that missed the rally but like BTC (the Dalios of the world) and they will pop the price back up. But if I'm wrong and BTC gets creamed by 80% and alts by 95%, well, I still own plenty of old finance assets in old finance institutions. My life won't change much. I'm just going to be a little pissed that I didnt rebalance earlier

I got it and it's quite a fair way to play bitcoin. Bill Miller on the interview said it was 1 percent allocation for him when he got into bitcoin, however he got in at $600 so it most likely has grown to a sizable allocation now

I don't want to press you on this, but aren't we all planning to sell most of our cryptos when the bitcoin bull market is over and not ride it down to a possible 2-3 year bear market cycle that could be as much as 80%+ peak to trough?

 

[Daal]

I got it and it's quite a fair way to play bitcoin. Bill Miller on the interview said it was 1 percent allocation for him when he got into bitcoin, however he got in at $600 so it most likely has grown to a sizable allocation now

I don't want to press you on this, but aren't we all planning to sell most of our cryptos when the bitcoin bull market is over and not ride it down to a possible 2-3 year bear market cycle that could be as much as 80%+ peak to trough?

Yes. But I dont drink a lot of the kool-aid that is out there. I have been trading and investing for a long-time and I noticed that people are not rational at bottoms and at tops, and gurus are so bad but it doesnt seem that way because they talk so well.

I recall David Rosenberg talking about the S&P500 staying in a range of 400-600 back in early 2009 and how stocks weren't a buy. I recall Mohammed El-erian calling the covid crash to a T and after stocks imploded by 30%, he said he was ONLY 'nibbling' in stocks and was pissed at other gurus for calling investors to invest (stocks are up 100% since then). I recall the massive bullishness around commodities in 2008, how there were stories about how we were running out of oil, how Jim Rogers was saying the bull in commodities had at least another decade. Right before commodities were the worst sector for years. I recall Ian Balina having a $5M crypto portfolio in 2017/2018, then getting hacked losing millions, and then hodling his garbage ICOs and blowing through most of the rest. Now he has a service to earn fees.

You seem to respect gurus too much, and they can lead you to do dumb mistakes. These people's skills are a lot worse than you think. The best traders and investors are unknown, you would never hear about them because they dont make it to mainstream. And a lot of them make their money and retire to live a good life. They dont have to run services

My goal is to be unemotional and rational at the top and the bottom. To make good decisions. Lots of these gurus just want to maximize their image and their fees, not to trade optimally, because most of them can't trade at all

 

[Daal]

So my philosophy is, dont listen to gurus, dont drink the kool-aid. Have some sort of model on what the top will look like and stick to it. Also, take profits along the way. You probably should be taking more profits than I do, because you have a record of not seeing tops, whereas my record is of selling too soon. But I dont trust even myself to not be affected by the emotions of a bull market and top. So I plan to fade myself from time to time and bank some profits even if I dont want to

 

[Daal]

This is all a big reason why on my journals I spend more time rambling about philosophical concepts of trading and investing, big picture ideas, then making market calls or putting price targets out like the gurus.

I rather learn and improve my decision making, my risk management, my chances of being right by having good thinking habits, etc. And when I write, I clarify my own thinking